Watchdog reviews state-backed company pension scheme

Sovereign annuities suggested as way of addressing fund deficits, but Pensions Board will first study default risk

T
he pensions watchdog is considering allowing company pensions backed by the
state, but is first drafting plans on what would happen should Ireland
default on its debt. Large public companies including Aer Lingus and
Independent News & Media have highlighted sovereign annuities as a means
of funding yawning pension deficits. The annuities could return pension
schemes to solvency by linking payouts to retired members to the bumper
yields on Irish government bonds.

Before giving authorisation, however, the Pensions Board is considering the
risk to pensions if the state were to default, which could destroy the value
of pensions. The regulator said rules governing how sovereign annuities
would operate would be published shortly. “We’re working through technical
issues,” it said.

Brendan Johnston, a pensions director at Zurich Life, said: “It’s up to the
Pensions Board to put down rules dealing with default. It’s up to us to see
if we can